Investing for beginners can be expensive for those who don’t know how to invest and minimize costs. You can invest at very low cost once you know which fund companies to invest with. You can also get some of the best service in the business free of charge.

The small investor can save thousands over the long term, and folks with a sizable lump sum to invest can save thousands up front and every year they hold their mutual fund investments. Here’s how to invest and make the best of it. This is a true story about an old friend of mine, Jack, who had almost exactly $100,000 in an account with his employer he had quit working for. This happened about a year ago.

Jack called the toll-free number provided to him by his employer because he didn’t know what else to do … and he wanted to take control of his money without getting hit by a big income tax bill. He was hooked up with a representative (rep) of an investment company inNew York City. After 15 minutes of questions about how Jack felt about risk and so on, the rep told him that he could roll the money into an IRA for him so he could avoid paying taxes. The rep would send a proposal showing exactly how to invest his $100,000. All Jack had to do was sign every line that had an X beside it and send the papers back.

Jack gave me the package to look at since he trusted me and he knew virtually nothing when it came down to how to invest money. The stack of papers was thick and confusing by anyone’s standards.

The recommendation was to invest in stock funds and bond funds from three different fund companies. The representative would help Jack in the future when he had more money to invest, and would provide ongoing service for a yearly fee. Jack wanted me to tell him how much it would cost to invest with the program presented. Here’s what I found.

SALES CHARGES: Average upfront sales charges were almost 5%. This means that $5000 comes off the top when you invest. And that means that Jack’s account starts off with a value of only $95,000.

FUND EXPENSES: Yearly fund expenses averaged almost 1.5% per year. This means that about $1500 would come out of his fund assets the first year. These expenses applied every year, costing 1.5% of whatever the value of his funds were for a particular year.

SERVICE AND MANAGEMENT FEES: These amounted to 1.5% a year as well, each and every year. This was an additional fee for the services provided by the representative. There’s another $1500 just to invest in the first year.

TOTAL COST TO INVEST $100,000 FOR THE FIRST YEAR: Just about $8000.

It can be quite expensive if you don’t know how to invest in mutual funds. I showed Jack where to invest and how to invest with the two largest fund companies inAmerica: Vanguard and Fidelity. He simply called both companies toll-free, asked questions and found both companies very helpful. He opened IRA accounts with both. How much did it cost him to invest $100,000 in mutual funds divided between the two LARGEST, and in my opinion BEST mutual fund companies in America?

SALES CHARGES: None.

YEARLY FUND EXPENSES: Less than ½% a year.

EXTRA YEARLY FEES FOR MANAGEMNT AND SERVICE: None.

TOTAL COST TO INVEST IN YEAR ONE: About $500.

Now you know both where to invest and how to invest in mutual funds and keep the cost of investing as low as possible. A dollar saved in charges, fees, and expenses equals a dollar earned. Invest with the best and make your money grow.